Thursday, March 11, 2010

The Banana Dollar is Coming

There is growing concern in business, financial, academic, and political circles that trillion dollar deficits for the next decade will cause inflation. To accommodate inflation, the Federal Reserve Board can literally print money using its high speed intaglio presses or credit the accounts of banks through the purchase of securities, and so forth. Whereas $20 bills were sufficient to buy a bag of groceries some years ago, $50 and $100 bills are increasingly needed to avoid filling wallets and purses with bundles of paper money.

High denomination bills were last printed in 1945, but allowed to remain in circulation until 1969, when they were officially discontinued by Executive Order of President Richard Nixon to combat organized crime. By law, the Treasury retains the legal authority to request the Fed to print higher denomination notes and place them in circulation.  At some point, the Fed may find it appropriate to resume printing of $500 and $1000 bills to make cash purchases easier.

If and when that time comes, the U.S. will be on its way to becoming a banana republic. Graphic artists should redesign the high denomination bills to reflect that reality. An explicit example is the $10 unnumbered note printed for use in Japanese-occupied Malaya during World War II. It displays a banana tree on the obverse (front) side.  

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